Investing Advice for the Trump Era

[brainfailure]

So this is a kind of a classic "How do I invest my lump sum?" type question with a little Trump twist.

Normally, when I have a big amount to invest I just increase my monthly taxable stock account contributions until I spend that lump sum down.  All this Trump business is making me a little nervous; I'm a little concerned that the Administration is anti-globalization and trying to institute more protectionist policies.  Are you guys changing your strategies?  Do you think all of this blows over?  Do you think that it won't really impact the general economy that much and that the markets will steadily rise?  Or have you been looking at alternative investments?

So I've got about $150k sitting in a savings account that I need to invest (that's aside from an emergency fund).  I make monthly contributions to a 403b to max that out and contributions to a couple college accounts and a taxable stock account with Vanguard- none of that has changed.  Almost my entire portfolio is stock as I try to avoid investments that pay interest (ie I have no bonds, no CDs, etc).  All my equities together total about $600k.  I'm 36 and I expect to work full time another 10yrs and then hopefully go halftime for awhile and hopefully retire a little early.

Here are the options that I've come up with:

1) Do as I always have done and increase my contributions for the next 6-12 months until the money is all in the market and get it all working for me.

2) Just dump it in the market right now- (not excited about that; think the market is probably a little overvalued).  I guess you just accept the idea that over the LONG term, the stock market is probably the best way to go.

3) Try to wait for corrections and try to time the market.  I know, I know; but very tempting.  I think a correction is around the corner.

4) Buy real estate and rent it out.  I live in a college town, so I'm pretty sure anything I buy will get rented for sure.  That said, not sure I wantthe headaches.  I could hire a property manager, but that cuts into profits.  Tax advantages are a plus.  Also, given my 100% Equity portfolio, this gives me some diversification and I would think reduce some of my risk.

5) Crowd-funded real estate.  Never tried it, but I'm certainly curious.  I'm signed up for all the sites, but haven't had the guts to put money in yet.

So what do you guys think?  Are you guys adjusting your strategies based on these political changes?

 

[Complete_newbie]

Own RE.

Also I dont understand when people say "I could hire property manager but that reduces profits". Still pretty profitable without the headache and direct diversification which is better than REIT.

[DMFA]

Do you not have IRAs?  You should be putting $5,500 annually into a backdoor Roth IRA (non-deducted trad contribution -> Roth conversion), and another for your spouse if married.

Are you HSA-eligible? This is one of the best retirement accounts (triple tax-advantage if used for healthcare, otherwise slightly better than a TIRA for retirement).  That's $3,400 if single, $6,750 if married each year.

Taxable accounts are a good adjunct once you maximize the tax-advantaged accounts.

1. Not a bad idea


2. Meh, market is riding pretty high (all-time, almost), TIME IN the market is more important than TIMING the market, etc


3. Trying to catch a knife on the way down...?  You never really know where the bottom is, but you just know that today is better/worse than yesterday, etc.


4. Not a bad idea, though this has its own set of risks and expenses.  You do get to play with leverage, though.  It's more of a cash flow option than a retirement plan per se.


5. WCI has a few good posts about various crowd-funding options, including personal loans.  I do believe there was one in the past few months about real estate.

Re: Trump, that's a giant wild card.  Look at what happened with the election: US equity futures were being reported to have lost a huge amount, then the markets opened and had ended up gaining.  I've got no clue what's going to happen, and I'm not sure anyone else does, either.  Best way imo is to have some in domestics and some in internationals, and some in equities and some in bonds, which is p much what is generally recommended for just about any investor.

[brainfailure]

THanks for the reply.  Already loaded up on IRA and HSA.

[WallStreetPhysician]

I vote for dump it all in the market now.  People have been waiting for a correction for almost 8 years now.

Here's one way to think about it: if you're planning to hold it for 25-30 years, you'll probably sell when the S&P 500 hits 10000.  Will it matter to you then whether you bought the S&P 500 at 2280 or 2180?

[VagabondMD]

I do not adjust my investment strategy based on who sleeps in the White House.

[Zaphod]

Unless youre planning to retire asap, you shouldnt worry about it. While I havent altered my strategy due to that, it does have me concerned. I sure hope all the protectionist schemes dont come into play because yes that will most definitely affect the economy, as does agitating china, etc...I see Trump as a giant tail risk, and none of his advisors seem to be able to reign him in and he listens to the most nutty one. Ugh.

If you want to see the market continue, what we need to see from Trump is less geopolitical agitating and more work on the business/tax front, and less talk about a border tax. I am not holding my breath, seems the base signaling is going to go on a while so he can build some mulligans in and do whatever else he wants without push back.

My property management charges 6% of rent, that is very very worth it to me to not have the headaches in real time. Your asset is still being paid off.

[jhwkr542]

All of this is noise. You're investing for the long haul. Best way to maximize returns is to have your money in the markets as long as possible. Dump it in according to an asset location that fits your risk tolerance and let it grow. The last step may be the most important: don't panic if it loses value.

[Aj]

Similar position (not as much, though).  I chose to continue my current strategy as I'm in the market for at least another 15-20 years at the the current allocations ......

[Andrew]

So asking another questions. Like in my situation I am limited to 403B and Roth IRA therefore i use taxable account as retirement account supplement. Should i use HSA instead? At least for now. I hope i will be able to open my own 401k in 3 years.

[jhwkr542]

I'd use the HSA space if you have a HDHP.  It'll fill up fast, but always use the tax-advantaged space before starting a taxable.

[DMFA]

Why pay taxes if you don't have to? Maximize your tax-advantaged accounts (401k, 403b, IRAs, HSA, 457, DBP, etc) before your taxable imo. There are a few instances where you *might* prioritize a taxable, but this isn't one of them.

[Andrew]

Thanks for advise.

Where can I open HSA account? Do I need to do that through my employer or can I do it on my own? They have some health  flex accounts but you can enroll one a year at the end of calendar year.

I would prefer to have Vanguard options available.

[StarTrekDoc]

#4.  Diversify beyond equities.  --- it's a combo cash flow and retirement/investment, depending on how much leveraging you're doing.

KIS for the first property.  Get a stable condo, hire management company, and see how it goes.  Yes, cashflow will be impacted, but it's your first foray into the business, and that's exactly what properties are compared to straight equities.

The property deduction is nice upfront with what I presume you have a higher tax bracket.

[BurnedoutDoc]

I own two small rental properties for about 10 years.  If I had to do it all again I would have just dumped that money into the stock market.  Even with a management company real estate is a pain.  The stock market may be occasionally volatile (so can real estate) but it will never sue you, make you refinance it, get insurance on it, or embezzle your money (yes this happened with the secretary of the management company, lost a few thousand)

I put a lump sum into vanguard total stock a few weeks ago, it is already up 1.25% and pays about 2.5% dividends.